Discount Retailing in the UK - Verdict Channel Report

 Published On: Mar, 2015 |    No of Pages: 115 |  Published By: Verdict Research | Format: PDF
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Summary

UK discounters were the winners of the downturn, with expenditure growth of 89.1% between 2010 and 2015. However, discounter volume and expenditure growth is slowing due to fewer space opportunities and attracting new shoppers becoming harder, with total market growth between 2015 and 2020 more than half that achieved between 2010 and 2015.

Key Findings

• Market issues are examined; space, impact of and to grocers, private label, multichannel and international opportunities; to inform decision making

• Use our regional and location store data to identify and invest in underserved areas of the UK and lucrative store formats

• Choose which product sectors to prioritise and grow based on 2015 and 2020 sales forecasts across six key sectors.

• Use our market share data to analyse which players are struggling, enabling you to strategise for the future and gain competitive advantage.

Synopsis

The market will start to mature following rapid growth between 2005 and 2015, having won most of their new customers throughout the downturn, meaning that those who wanted to trade down will already have done so. The challenge for the discounters in the future will be in driving like-for-like sales, making professionalisation of the channel vital.

The grocers and non-fixed price discounters will capture an even bigger share of the discounters market over the next five years, with 58.2% and 27.8% shares of the overall market, respectively, in 2020. The grocers’ growth is driven by Aldi, but Lidl’s expansion and Netto’s return to the UK market will contribute to the rise.

Consumers have traditionally favoured discounters for deals on branded goods across food & grocery and health & beauty and while these remain the largest segments driving footfall to the discounters; it is the home sectors which will make the greatest gains in the next five years, benefited by the recovery in the housing market.

Reasons To Buy

• Who are the top performing discounters in terms of UK turnover and market share, and what are their strategies?

• Will consumer preferences start to change as the economy recovers and how should discounters adapt?

• What part will inflation and volumes play in discounter growth in the next five years?

• Can ecommerce become a viable channel for discounters, and how can they achieve this?

• What UK regions remain underserved by discounters and what issues must be considered before store rollout?

Table of Contents

1 Overview
2 Outlook
2.1 Winners of the downturn
2.2 Volume growth defies total retail trend
2.3 Food & grocery makes greatest gains, though share slips from 2014
2.4 Permanent shift in shopper mind-set protects future growth
2.5 Driving like-for-like growth will be essential
2.6 Range expansion needed in home sectors
2.7 Investing in private label will improve destination appeal
2.8 Space opportunities remain
2.9 Lidl loses share of discounter market
2.1 99p Stores acquisition to boost Poundland
3 Recommendations
3.1 Drive l-f-l growth
3.2 Penetrate the south of the UK and OOT locations
3.3 Discounters must be ready as grocers continue to react
3.4 Increase destination appeal via private label
3.5 Must have ecommerce presence to maximise potential
3.6 Expand into Europe as domestic market matures
4 Market Size
4.1 Market definition
4.2 Discounter expenditure
4.2.1 Growth drivers of the UK discounters market
4.2.2 Volume growth driving discounter expenditure
4.3 Aldi and Lidl drive the market
4.4 Food versus non-food
4.4.1 Specialists success drives food growth
4.4.2 Food & grocery share slowly falls from 2013
4.4.3 Non-food becomes more important among the discounters
4.5 Sector segmentation
4.5.1 Food & grocery fastest growing sector
4.5.2 Food & grocery
4.5.3 Health & beauty
4.5.4 Homewares
4.5.5 DIY & gardening
4.5.6 Toys
4.5.7 Books, news & stationery
4.5.8 Other
4.6 Spend per head
4.6.1 Spend per head grows £162 in five years
5 Market Forecast
5.1 Market definition
5.2 Discounter expenditure
5.2.1 Growth drivers of the UK discounters market
5.2.2 Inflation will rise due to cost price pressures, while volume growth will ease
5.3 Food versus non-food
5.3.1 Food & grocery to underperform non-food as discounters diversify their offers
5.3.2 Food & grocery sector drives discounter inflation growth
5.3.3 Larger homewares and DIY ranges will push non-food growth
5.4 Sector segmentation
5.4.1 Health & beauty
5.4.2 Homewares
5.4.3 DIY & gardening
5.4.4 Toys
5.4.5 Books, news and stationery
5.4.6 Other
5.5 Spend per head
6 Channel Shares
6.1 Definition
6.2 Channel breakdown
6.2.1 Five-year summary
6.2.2 Forecast
6.2.3 Channel shares
6.2.4 Channel expenditure growth
6.2.5 Change in channel share
7 Market Shares
7.1 Discounter market shares
7.1.1 Winners and losers
7.1.2 Market shares excluding the German grocers
7.2 Key operating statistics
7.2.1 Summary
7.2.2 Sales
7.2.3 Stores
7.2.4 Operating margin
7.2.5 Sales densities
7.2.6 Sales growth versus space growth
8 Trends
8.1 Space expansion opportunities
8.1.1 Summary
8.1.2 Store openings must become more strategic
8.1.3 Space productivity
8.1.4 Regional opportunities
8.1.5 Physical location opportunities
8.1.6 Discounters grow their OOT presence
8.2 The threat of, and to, the grocers
8.2.1 Mainstream supermarkets will continue to react
8.2.2 But discounter grocery market share challenge will continue
8.3 If you can’t beat them, join them: Sainsbury’s and Netto
8.3.1 Unique partnership will impact discount grocery
8.4 Private label advancement can improve destination appeal
8.4.1 Private label ranges allow discounters to become destinations
8.4.2 Opportunities for private label growth lie in the home sectors
8.4.3 Private label perception among UK consumers
8.4.4 Value own brand ranges appeal to the discounters' core 35–54 year old savvy family shopper
8.5 Discounters currently have a limited online presence
8.5.1 Major discounters online
8.5.2 Several hurdles remain to the success of discounter formats online
8.5.3 Discounters must have ecommerce presence to maximise potential
8.5.4 Discounters will have to adapt to see gains from ecommerce
8.6 International opportunities and local threats
8.6.1 Growing strength of discounters across Europe
8.6.2 European countries to target and avoid
8.6.3 Germany
8.6.4 France
8.6.5 Spain
8.6.6 Ireland
8.6.7 Central and Eastern Europe
9 Methodology
9.1 Discounter market size and forecast methodology
9.2 Discounter market share methodology
9.3 Discounter sales density methodology
9.4 Discounter spend per head methodology
9.5 Definitions
9.5.1 Discounter market definition
10 Appendix
10.1 About Verdict Retail
10.2 Disclaimer

List of Tables

Table 1: Discounter sales (£m) and year-on-year change (%), 2005–15e
Table 2: Discounter food & grocery sales (£m) and year-on-year change (%), 2005–15e
Table 3: Discounter non-food sales (£m) and year-on-year change (%), 2005–15e
Table 4: Discounter sector performance (£bn), 2010–15e
Table 5: Discounter sector performance year-on-year change (%), 2010–15e
Table 6: Discounter sales (£m) and year-on-year change (%), 2005–15e
Table 7: Discounter food & grocery sales (£m) and year-on-year change (%), 2005–15e
Table 8: Discounter non-food & grocery sales (£m) and year-on-year change (%), 2015–20e
Table 9: Discounter sector performance (£bn), 2015–20e
Table 10: Discounter sector performance year-on-year change (%), 2015–20e
Table 11: Discounter expenditure channels of distribution definitions, 2015
Table 12: Discounter expenditure channels of distribution (%), 2010–15e
Table 13: Discounter expenditure channels of distribution (£m and % share), 2014, 2015e and 2020e
Table 14: Discounter market shares (%), 2010–15e
Table 15: Discounter market shares, excluding Aldi and Lidl (%), 2010–15e
Table 16: Discounter UK operating statistics, 2014/15e
Table 17: Discounter UK sales (£m) and five-year change (%), 2010–15e
Table 18: Discounter UK sales (£m) and five-year change (%), 2010–15e

List of Figures

Figure 1: Drivers of growth for the UK discounter market, 2010–15e
Figure 2: Discounter expenditure (£bn) and year-on-year change (%), 2005–15e
Figure 3: 87–95 Rye Lane, Peckham, London 2008 and 2015
Figure 4: Unit and floorspace vacancy rates (%), 2006–14
Figure 5: Discounter inflation/deflation, volume and value growth (%), 2005–15e
Figure 6: Discounter total growth versus total retail (%), 2005–15e
Figure 7: Discounter volume growth versus total retail (%), 2005–15e
Figure 8: Discounter expenditure excluding Aldi and Lidl (£bn) and year-on-year change (%), 2005–15e
Figure 9: Discounter year-on-year change including versus excluding Aldi and Lidl (%), 2005–15e
Figure 10: Discounter food & grocery and non-food expenditure year-on-year change (%), 2010–15e
Figure 11: Discounter food & grocery expenditure (£bn) and year-on-year change (%), 2005–15e
Figure 12: Discounter food & grocery growth versus total food & grocery growth (%), 2005–15e
Figure 13: Discounter food & grocery inflation/deflation, volume and value growth (%), 2005–15e
Figure 14: Discounter share of health & beauty market (%), 2005–15e
Figure 15: Discounter non-food expenditure (£bn) and year-on-year change (%), 2005–15e
Figure 16: Discounter non-food growth versus total non-food growth (%), 2005–15e
Figure 17: Discounter non-food inflation/deflation, volume and value growth (%), 2005–15e
Figure 18: Sector segmentation of UK discounters market (%), 2010 and 2015e
Figure 19: Change in sector performance at the discounters (%), 2010–15e
Figure 20: Discounter food & grocery expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 21: Discounter health & beauty expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 22: Discounter homewares expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 23: Discounter DIY & gardening expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 24: Discounter toys expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 25: Discounter books, news and stationery expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 26: Discounter other expenditure (£bn) and year-on-year change (%), 2010–15e
Figure 27: Spend per head at the discounters in the UK (£) and year-on-year change (%), 2010–15e
Figure 28: Spend per head at the discounters in the UK excluding Aldi and Lidl (£) and year- on-year change (%), 2010–15e
Figure 29: Growth drivers of the UK discounter market, 2015–20
Figure 30: Discounter expenditure (£bn) and year-on-year change (%), 2015e–20e
Figure 31: Discounter total growth versus total retail (%), 2015–20e
Figure 32: Discounter volume growth versus total retail (%), 2015–20e
Figure 33: UK economic outlook versus discounter market growth (%), 2020e
Figure 34: Lidl’s Burgundy wine offer, 2015
Figure 35: Net store expansion of the 10 largest UK grocers (total stores), 2010–15e
Figure 36: Discounter inflation/deflation, volume and value growth (%), 2015e–20e
Figure 37: Causes of discounter inflation rises and volumes easing, 2015
Figure 38: Discounter food & grocery and non-food expenditure year-on-year change (%), 2015–20e
Figure 39: Discounter food & grocery expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 40: Discounter food & grocery inflation/deflation, volume and value growth (%), 2015–20e
Figure 41: Discounter non-food & grocery expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 42: Discounter non-food & grocery inflation/deflation, volume and value growth (%), 2015–20e
Figure 43: Sector segmentation of UK discounters market (%), 2015e and 2020e
Figure 44: Change in sector performance at the discounters (%), 2015–20e
Figure 45: Discounter health & beauty expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 46: Discounter homewares expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 47: Discounter DIY & gardening expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 48: Discounter toys expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 49: Discounter books, news and stationery expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 50: Discounter other expenditure (£bn) and year-on-year change (%), 2015–20e
Figure 51: Spend per head at the discounters in the UK (£) and year-on-year change (%), 2015–20e
Figure 52: Discounter channel shares (%), 2010, 2015e and 2020e
Figure 53: Discounter channel expenditure growth (%), 2020e on 2015e
Figure 54: Discounter change in channel share (percentage point), 2015–20e
Figure 55: Discounter market shares (%), 2010 and 2015e
Figure 56: Discounter change in market shares (percentage points), 2015e on 2010
Figure 57: Discounter UK operating margins (%), 2008/09 and 2013/14
Figure 58: Discounter UK sales densities (£/sq ft), 2009/10 and 2014/15e
Figure 59: Discounter UK space growth versus sales growth (%), 2014/15e
Figure 60: Space considerations for UK discounters, 2015 and beyond
Figure 61: New stores and space commitments
Figure 62: Discounter space productivity, 2014/15e
Figure 63: Discounter store presence in Great Britain, 2015
Figure 64: Change in out of town space mix (%), 2014–19e
Figure 65: Discounter store presence in the UK, 2015
Figure 66: Fixed price retailers' multi-price formats
Figure 67: BHS stores offer discounters prime space
Figure 68: The grocers will continue to counter discounters, 2015
Figure 69: Part of Home Bargains' limited online food offer, 2015
Figure 70: Aldi fish finger price comparison, 2015
Figure 71: Lidl, Sevenoaks, Kent, 2013
Figure 72: Netto store fascia, 2015
Figure 73: Netto store requirements, 2015
Figure 74: Netto highlights fresh products in Fresh Five promotion, 2015
Figure 75: Opportunities for private label investment, 2015
Figure 76: How B&M should follow Home Bargains' footsteps in homewares, 2015
Figure 77: Percentage of UK consumers who agree private label products are a good alternative to name brands, by food & grocery category (%), 2014
Figure 78: Percentage of UK consumers who agree private label products are a good alternative to name brands, by gender (%), 2014
Figure 79: Average percentages of UK consumers who agree private label products are a good alternative to name brands, by age (%), 2014
Figure 80: Wilko's family suncare ranges and first aid sets, 2014
Figure 81: Discounters online, 2015
Figure 82: Home Bargains’ delivery costs , 2015
Figure 83: Poundstretcher online has a simple layout and clear navigation, 2015
Figure 84: poundshop.com’s format encourages browsing , 2015
Figure 85: Key stats of major European discounters, 2015
Figure 86: Discount market by region, 2015
Figure 87: TEDi key facts, 2015
Figure 88: Leader Price store fascia, 2015
Figure 89: Dia store fascia, 2015
Figure 90: Poundland’s Dealz store fascia in Spain, 2015
Figure 91: Aldi’s Ireland website showcasing its Irish credentials, 2015
Figure 92: Biedronka store fascia, 2015
Figure 93: Advantages of market entry through licenses or acquisitions, 2015

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